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Economic Growth and Development Paper – NLEX

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Significance of Toll Road Industry and the North Luzon Expressway (NLEX) Concession in the Philippine Economy

Viewed from the perspective of the total road network of the Philippines having 202,000 km., the current length of all tolled expressways (about 320 km.) in the country represent a mere 0.16%. At the same time, all are operating and located in the Mega Manila area traversing the National Capital Region and nearby provinces in Central Luzon and Southern Tagalog region. Available financial data and a level of approximation also indicate that total toll revenues collected for 2011 of about PHP 14 bio represent only a little over 0.10% of the country’s nominal gross domestic product (GDP).

It has been recognized by the National Government that an efficient transport system together with an integrated and comprehensive road network are key essential drivers to spur economic growth and activity. This is particularly true for a developing country such as the Philippines, where 90% of all passenger movements and half of freight movement are handled by our road network system [NEDA-MTPDP 2004-2010]. Making them integrated and comprehensive would contribute to lowering transportation costs and improve substantially the transfer of goods and services across cities and regions. However, this thrust is an undertaking that the government has realized it cannot execute on its own.

As such, one of government’s key strategy in the past and continues to be an integral part of the plan to develop infrastructure in the country is the involvement of the private sector, initially under the “Built-Operate-Transfer (BOT)” framework and now known as “Public-Private Partnerships (PPP)”. From this context, the role of the toll road industry in the transport sector and the overall infrastructure development plan of the government could be considered a significant concern. The industry has and continues to contribute in decongesting heavy concentration of movements in industrial hubs and Metro Manila. It has likewise provided vital access and maintains essential linkages to and across economic zones in Northern and Southern Luzon. To a certain extent, the industry contributes in spreading economic activities to underdeveloped areas.

A specific case to point out is the rehabilitation and modernization of the 84 km North Luzon Expressway (NLEX) undertaken as Phase 1 by our group. This project has been labelled one of (if not) the largest infrastructure project in the Philippines in the last ten years with total project cost of USD 384mio. Project financing involved financial institutions from Europe and Australia and included the Asian Development Bank (ADB) and International Finance Corporation (IFC) of the World Bank Group. Completed in time and within budget, the rehabilitated and modern NLEX continues to contribute and/or impact the socio-economic landscape with the following findings (as studied by the University of the Philippines Planning and Research Foundation from 2004 to 2006).

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